Investment by large-scale investors in Build-To-Rent is set to triple by 2020, according to new research from Knight Frank.
Knight Frank estimates that this growth will take the total investment in this sector to £50bn over the next five years, increasing the size of Build-To-Rent from 2% of the total PRS sector to 5%.
This finding comes as part of a new report by Knight Frank, which incorporates a survey of 16 large scale Build-to-Rent investors. These investors also shared their views on where gross yields would stand around the country in 2020, with expectations that yields in regional city centre markets would settle 1.75 basis points higher than London by then, assuming that the economy performs in line with market expectations in the meantime.
The Tenant Survey report also includes the findings of a nation-wide survey of tenants living in the private rented sector, the biggest survey of its kind ever undertaken, with more than 5,000 respondents.
This survey, undertaken in conjunction with YouGov, found that:
- More than half (52%) of tenants said living close to work or their place of study is a key priority
- 30% of respondents said their main reason for moving was to upgrade to larger or nicer accommodation, emphasising the flexibility of the sector
- More than a third (38%) of tenants have lived in five or more rental properties. While many respondents had moved within a mile of their previous property, around a fifth (19%) had moved more than 60 miles, indicating a relocation for work or study, highlighting the flexibility of PRS as a tenure
- The majority of tenants across the country (28%) said they would be prepared to pay up to30% of their gross income on rent, although in London, nearly a third of under-25s (31%) are prepared to pay up to 50% of their income on rent
- A quarter of those living in the private rented sector live alone, while 34% live in a couple without children. Some 43% of 18-24 years olds share with other adults in a ‘flat-share’
Grainne Gilmore, Head of UK Residential Research, said: “The Tenant Survey shows us that priorities for tenants when choosing a property include proximity to their place of work or study, how easily they can reach transport links and how affordable the property is.
Tenants are mobile, owing to the flexibility offered by renting as a tenure, and while the motivations for moving vary, the largest cohort of respondees identified the wish to ‘upgrade’ to a bigger or nicer property as their key motivation for moving into their current rented property.”
James Mannix, head of residential capital markets at Knight Frank, commented: “The results from the Tenant Survey and the Investor Survey demonstrate that there is a generational shift in the market both amongst renters and investors which stands a good chance of both stabilising the volatility of the housing market and satisfying some of the structural shortfall in supply. One of the major controls on production of housing is projected rates of sale. The rental market could significantly accelerate this factor through immediate absorption.”